From Michelle Grattan:
Underlining the importance of the AAA rating, he said a loss of it from one or all of the three agencies would increase the cost of government borrowing. “Now as a progressive alternative treasurer who wants to fund investments in schools, hospitals and infrastructure, I want to have that money available, not being wasted on payments to bond holders.”
He said a Labor administration would have an economic statement (aka mini-budget) within its first three months “to reflect the new government’s priorities and approach”.
As part of the new way under Labor, it would remove the preparation of the economic forecasting for the budget from Treasury, and have it done by the Parliamentary Budget Office (PBO), a body that at the moment mostly does costings at the request of the opposition, Greens and other minor players.
Treasury’s forecasts and projections are perennially questioned and Bowen as well as some commentators doubt those in this year’s budget. Often Treasury gets the numbers wrong. Sometimes critics see the forecasts as influenced by the government of the day.
Bowen said that having the PBO do this work “will ensure that economic forecasts are undertaken at arm’s length from government, giving the public more confidence in the budget process”. This sort of system operates in Britain where the Office for Budget Responsibility does the forecasts.
The PBO is a highly credible body, which has done a terrific job and removed much of the dispute about costing of election promises. It’s also true that the Bowen change would remove the grounds for accusations of political fiddling with the figures.
On the other hand, the problem that there is perceived political interference could surely be addressed by a treasurer making a firm declaration that there would be no massaging of Treasury figures.
Economist Saul Eslake describes the Bowen proposal as “a bit of a gimmick”, saying that “there is no reason why [the PBO’s] forecasts would be any better or worse than Treasury’s”.
To cope with the extra task the PBO would have to be expanded – many of the additional staff would probably be drawn from Treasury.
And there is no saying that David Gruen and or Nigel Ray or some other jelly-backed crowd pleaser won’t end up at the PBO butchering everything in site all over again,
But to a man dying of thirst this is a flood of good sense.
